A Portfolio Has 30% of Its Value in IBM Shares

question 8

Multiple Choice

A portfolio has 30% of its value in IBM shares and the rest in Microsoft (MSFT) . The volatility of IBM and MSFT are 35% and 30%, respectively, and the correlation between IBM and MSFT is 0.5. What is the standard deviation of the portfolio?

• A) 23.61%
• B) 27.78%
• C) 31.95%
• D) 30.56%

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Definitions:

Absorption

The process by which one substance becomes taken up or incorporated into another substance, such as a gas being absorbed by a liquid.

Wavelength

The distance between consecutive crests or troughs in a wave, often used in the context of electromagnetic radiation.

Electromagnetic Radiation

Energy that travels through space in the form of waves, encompassing a broad spectrum from radio waves to gamma rays.

Absorption

The process by which one substance takes up or holds another substance at the interface between them or within its internal structure.